Options Trading News

January 24, 2013  Thu 4:15 AM CT

The momentum bulls made some fast money in Assured Guaranty yesterday.

optionMONSTER's tracking programs detected unusual call volume in the beaten-down financial, which trades for barely half its book value. Some 3,100 February 18 calls were bought early for $0.11 and $0.12 in volume that was well above the strike's previous open interest of just 1,113 contracts, indicating new activity.

Those calls lock in the price where investors can buy stock, so they can generate significant leverage in the event of a rally. And that's exactly what happened yesterday in Assured Guaranty. (See our Education section)

The stock was at $16.45 when the trades hit and crept higher as the session progressed, ending with a 5.47 percent gain to $16.98. The calls more than doubled in the process, fetching $0.27 by late in the day.

Overall option volume was 6 times greater than average, with calls accounting for a bullish 84 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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